Dive Brief:
- A new study from the Platte Institute for Economic Research predicts that by 2018 Nebraska's power rates will be 7.5% higher than other states in the West North Central (WNC) region of the U.S., as the state's reliance on coal generation runs into increasingly-strict environmental regulations.
- Power prices have already been increasing because cheap gas has made excess power sales less valuable to the Cornhusker state: Between 2007 and 2013, the study found prices per kWh of energy grew by 60%.
- While Nebraska's power prices remain competitive in the region for now, the growth in rates is a distinct change for the only state in the United States to deliver all its power via public utilities.
Dive Insight:
Is the public power model still working in Nebraska? A new study from the free market think tank PIER raises the question with the prediction that Nebraska consumers will soon be paying more for energy than their neighbors.
The new study notes that while Nebraska is still competitive – the state's average power price is the third lowest in the WNC region – rates are growing much faster than in the six other states.
"Electricity price data between 2005 and 2014 show that Nebraska’s volatility in overall electricity prices
was the highest in the WNC region and 45.4 percent above the regional average," the study concluded. "Nebraska’s average industrial rates have trended upward over the past decade, surpassing and remaining above the national average since 2012."
Publically-owned utilities serve all Nebraskan residents, but some question whether changing that model might beget lower prices. This autumn, renewable energy officials suggested the state's ratepayers could save $250 million annually by opening the state's electric markets to competition.
Some of the rise in industrial prices "could be attributed to the state’s heavy use of irrigation in agriculture," PIER study author Ernie Goss writes on the organization's web site. Those customers have been classified by the U.S. Energy Information Administration as industrial since 2003.
"Customers in rural areas are expensive to serve because of the investment required to build the distribution infrastructure and the demand that irrigation systems require during certain times of the year," Goss explained. "During peak times, mainly July and August, demand for electricity from irrigation systems sometimes exceeds capacity and forces local utilities to buy excess power from sources in other states, which if purchased at elevated prices would contribute to higher overall rate increases."
But why will power prices continue to rise? "Increasing federal regulations are the major driver of this price uncertainty," said Goss.
The Clean Power Plan will require Nebraska to cust CO2 emissions by 40%, and the state relies heavily on coal. Barring the environmental plan failing in court, Nebraska "will have to pay for massive transmission infrastructure changes," Goss said, to bring in new gas-fired and renewable energy.
Another study released by PIER said the CPP "unworkable" and "unaffordable" for Nebraska's utility sector.
"The state’s transmission infrastructure would need to undergo significant, costly upgrades to accommodate an unrealistic target for renewable and natural gas production," wrote Jessica Herrmann, PIER's director of research. "Ultimately, Nebraska must resist increasing federal pressure to comply with this unworkable energy mandate."